"XFL Lawsuit" Update

by Brandon Thurston

Public filings with the Delaware court show WWE responded on February 4 to a complaint and demand for records by a plaintiff, Oklahoma Firefighters Pension and Retirement System, with a motion to dismiss. 

The plaintiff, a WWE shareholder, alleged conflicts of interest against WWE and Vince McMahon, previously outlined in the tweet thread linked below. In brief, they’re suspicious the XFL intellectual property was sold and WWE employee services are being sold to XFL at a rate below fair value.

WWE contradicts the plaintiff’s claims (more on that below). WWE argues the plaintiff’s demand fails to comply with the requirements because the demand is under oath of plaintiff’s counsel instead of the plaintiff, and therefore the demand should be dismissed.

WWE’s response states in a footnote: “Since WWE announced the XFL transactions questioned in May 2018, no other stockholder has complained about or questioned the transactions.”

According to WWE lawyers, “Plaintiff’s counsel squarely and falsely alleged that Charlie and Duncan Ebersol offered McMahon $50 million for the XFL trademarks” based solely on a presentation slide, and no such offer was ever made.

WWE notes it sent to OK Firefighters a November 14 letter including a declaration from Charlie Ebersol, stated under penalty of perjury, that no such offer in any amount was ever made for the XFL IP.

WWE says, contrary to the plaintiff’s allegations, it told OK Firefighters counsel that “WWE was represented by a special committee of independent directors, which retained independent legal counsel and an economic adviser” related to the sale of the XFL IP.

SEC filings show WWE sold the XFL IP to Alpha Entertainment LLC for $1 million and a “no risk” equity interest in Alpha. Alpha is the parent company setup by Vince McMahon to restart the XFL, with finances separate from WWE.

WWE says it formally responded to OK Firefighters’ demand on December 20, but the plaintiff omitted any information from WWE’s response that challenge the allegations.

The plaintiff questioned the authenticity of the Ebersol affidavit, noting it’s not notarized. WWE says it subsequently provided plaintiff with a notarized affidavit. 

Further, WWE says it “identified Weil, Gotshal & Manges LLP as the independent legal counsel that advised the special committee of independent directors and further identified Duff & Phelps, LLC as the independent financial adviser to the special committee on the transactions.”

WWE claims it “offered to produce all the records needed to evaluate the fairness of the XFL-related transactions,” if the plaintiff would agree to a confidentiality agreement. Nonetheless the plaintiff filed the demand on December 26.

The exhibits contain copies of several written communications (emails and letters) between WWE and OK Firefighters.

On the plaintiffs claim that WWE may have provided Alpha with support services at a low rate, Jerry McDevitt (long-time WWE legal rep) argues the plaintiff is “naive to the start-up activities of XFL and” that they have “no basis to infer wrongdoing in any event.”

McDevitt calls the interjection of the hiring of Paul Heyman and Eric Bischoff “frivolous”. Plaintiff had argued that the appointment of Heyman and Bischoff as executive directors was a sign that Vince was not devoting his full working time to WWE.

McDevitt ends the September 17 letter: “In closing, we note that your client’s investment in WWE has evidently been a prudent and profitable one, and we value your client as a shareholder.”

It’s notable, OK Firefighters bought WWE stock at around $43 per share. The day McDevitt sent this letter, shares were at 75.91. Friday they closed at 44.93.

OK Firefighters may not be as small a shareholder as previously thought. A holdings statement from November showed ownership of 107 shares. A statement from earlier, in August, shows ownership of 6,726 shares. 

So it appears OK Fire sold the vast majority of its shares at a profit, sometime between August 26 and November 29, before the recent stock price fall.

The November 17 letter from McDevitt to OK Fire counsel argues the latter’s allegations have no factual basis, largely centering around the presentation slide suggesting $50 million value of XFL IP.

McDevitt responds to the concern from the plaintiff that McMahon took a week off from WWE to work on XFL. McDevitt notes that belief is based on a report from “a random website called ‘XFL News Hub’ published by somebody identified only as ‘Sanjay’.”

As to reports that McMahon is not present at some WWE TV tapings: “[I]t is entirely unfair to suggest that Mr. McMahon, a man with a legendary work ethic, is somehow derelict in his duties if he in fact does not attend a given televised show of WWE.”

“He routinely attends by far the vast majority of WWE televised events every week, every month, and every year, including on weekends, and has for decades.”

McDevitt’s December 20 letter to OK Firefighters counsel scolds him for suggesting WWE would fabricate an affidavit from Charlie Ebersol. “Do you seriously believe, or have any reason to believe, that we ginned up a declaration and forged Mr. Ebersol’s signature on it?”

The letter attached the notarized affidavit. 

Exhibits also show WWE and OK Fire’s inability to come to terms on a confidentiality agreement.